A fiscal cliff 'mini-deal'?

A mini-deal on the fiscal cliff will give the new Congress and the White House time to craft a “grand bargain” on deficit reduction without going over the fiscal cliff, Reich writes.

By , Guest blogger

  • close
    In this April 2008 file photo, Jackie Doyle, of Greenwood Lake, N.Y., second from left, waits in line to mail her husband's taxes at the James A. Farley Main Post Office in New York.Tthe path of least resistance on the fiscal cliff is for congressional Republicans and the president to agree to kick the can down the road, Reich writes.
    View Caption

Want to know what’s going to happen to January’s fiscal cliff? Just remember: Political deals move the same way water goes down hill — following the path of least resistance.

Here, the path of least resistance is for congressional Republicans and the President to agree to kick the can down the road – keeping everything as it is (current spending, the Bush tax cut) until a date in the not-too-distant future — say, March 15.

As a sweetener, Republicans will have to agree to lift the debt ceiling again when a vote is needed to do so, probably in late January.

Recommended: Top 5 states for business in 2012

This mini-deal will give the new Congress and the White House time to craft a “grand bargain” on deficit reduction without going over the fiscal cliff.

It also enables the White House and Democrats to retain their trump card: The Bush tax cuts will automatically expire at the end of the negotiation period (in my example, March 15) unless an agreement is reached. So the top marginal tax rate automatically rises to 39 percent.

The downside of the mini-deal: Financial markets will remain uncertain about the ultimate deal. That means another several months of Wall Street gyrations. And certain industries – military contractors, drug companies, and other sectors dependent on government spending – may delay expansion or hiring until a grand bargain is struck.

But it’s far better than going over the cliff.

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. This post originally ran on www.robertreich.org.

Share this story:
 
 
Make a Difference
Inspired? Here are some ways to make a difference on this issue.
Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.
 

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...